Circuit Ponders Court Rulings: Request for Briefs Suggests More Deference to Them

Author: Jeffrey M. Fisher

September 27, 2005

The rate by which the United States Court of Appeals for the Federal Circuit reverses district courts in patent infringement cases is estimated to be a staggering 50%.  In connection with its recent en banc opinion in Phillips v. AWH, the Federal Circuit had requested briefing on whether it should accord any deference to the claim construction rulings of the district courts.  This was seen (and hoped) by many as an opportunity for the Federal Circuit -- established in 1983 with exclusive jurisdiction over patent related appeals in an effort to help bring about uniformity in the field of patent law -- to take an important step towards lowering the reversal rate in patent infringement cases and bringing about uniformity.

Determinations of infringement are made only after patent claims have been construed (at so-called “Markman hearings”), and disagreements over claims constructions are the primary reason for the Federal Circuit’s high reversal rate.  It was therefore hoped that giving deference to the district courts on claims construction rulings would lower the Federal Circuit's reversal rate, thereby increasing certainty, promoting the likelihood of early resolution of patent disputes and ultimately reducing the cost of patent infringement litigation.

The Federal Circuit's ultimate holding in Phillips v. AWH, 415 F.3d 1303 (Fed. Cir. 2005), however, decided a more narrow issue concerning the use of dictionary definitions in the claims construction process.  While the opinion is significant in that it clarifies certain claims construction principles, the sea change that many were hoping the Phillips opinion would bring about did not occur.  With respect to the issue of whether to accord deference to claims construction rulings of the district courts on which it had requested briefing in Phillips, the Federal Circuit remarked only that "[a]fter consideration of the matter, we have decided not to address that issue at this time."

The Federal Circuit’s failure to address this issue in its en banc opinion led to a spirited dissent by Judge Mayer (joined by Judge Newman).  Judge Mayer likened the Federal Circuit's opinion to simply "rearranging deck chairs on the Titanic." 

To understand the Phillips opinion, one must start with the Supreme Court's opinion in Markman v. Westview Instruments, 517 U.S. 370 (1996).  In Markman, the Supreme Court held that construing the claims of a patent is a task for the judge, and not the jury.  The Supreme Court did not hold that claims construction was purely a matter of law.  On the contrary, the Supreme Court recognized that claims construction involved mixed issues of fact and law, but believed that the function of construing patent claim terms was better served by judges than by juries because “judges … are better suited to find the acquired meaning of patent terms.”  One of the underpinnings of the Supreme Court’s analysis was its belief that, consistent with the creation of the Federal Circuit as the exclusive appellate court for patent cases, submitting claims construction issues to judges rather than juries would promote uniformity.  
           
In the Federal Circuit's en banc opinion Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998), the Federal Circuit went a step further than the Supreme Court had in Markman.  In Cybor, the Federal Circuit held that the district court's resolution of claims construction was “a purely legal issue” that should be afforded de novo review, i.e., the claims construction rulings of the district court should be accorded no deference by the Federal Circuit.

The lack of deference accorded the district courts in claims construction has not enhanced uniformity.  As Judge Rader stated in his dissent in Cybor:

The question of the proper standard of review seems an esoteric legal topic of interest only to law professors and appellate judges.  In most cases, however, the review standard influences greatly both the trial judges who preside over the trial process and patent practitioners who must advise clients to accommodate their business plans to an uncertain legal regime.

Some have questioned why already overburdened district courts would want to continue to devote significant judicial resources usually required to resolve patent infringement cases in light of the lack of deference accorded their claims construction rulings and the high reversal rate.  As suggested in one of the amicus briefs filed in connection with the Phillips opinion, "as a practical matter, district court judges care very little to invest time for a Markman hearing when their work will be ignored and disregarded on appeal."  Amicus Brief of Federation Internationale Des Counseils en Propriete Industrielle at 17-18.

It would be hard to blame the district courts.  Patent infringement cases tend to be complex and are often bitterly fought battles between well-heeled litigants.  They tend to consume an inordinate amount of judicial resources and take many years to resolve.  In an attempt to help streamline the process in the district courts, many district courts have adopted specific local rules to govern patent infringement litigation.  Given that the Bay Area has been a hot bed for high tech patent infringement litigation, the Northern District of California was among the first districts in the country to adopt local patent rules.  Even so, it can still take several years for patent infringement cases in this district and elsewhere to be resolved, and the costs can be staggering.  The Phillips case, for example, was filed in 1997 -- over eight years before the en banc opinion was issued – and the en banc opinion did not even resolve the case.  Instead, the infringement claims were remanded back to the district court for further proceedings.

Against this backdrop, the Federal Circuit's request for briefing on the issue of whether the district court's claims construction rulings should be accorded deference in connection with the Phillips appeal was seen by many as an indication that help was on the way.  Over thirty amicus briefs were filed, many urging the Federal Circuit to reverse its holding in Cybor and to address the high reversal rate.  Among the amici that argued that the Federal Circuit accord deference to claims constructions rulings were the ABA, the Federal Circuit Bar Association and the American Intellectual Property Law Association (AIPLA).  They argued that:

• "The Court's current practice has led to substantial uncertainty in patent infringement litigation.  With no deference afforded to the trial court on any aspect of the central issue [of claims construction], parties have every incentive to appeal and less incentive to settle regardless of the outcome at trial.  All of this is further fueled by the Court's substantial reversal rate.  At the same time, district courts have less incentive to construe the claims carefully and spend the time necessary to reach a reasoned decision given the absence of deference and the district courts’ view of the high reversal rate."  Amicus Brief of the ABA at 17-18 (citation omitted).
  
• "This Court is well aware of the frustration expressed by many district courts over the legal fiction that they are not weighing evidence or making credibility determinations [in construing patent claims].  Moreover, nearly ten years of experience has shown that the de novo standard of Markman and Cybor has not promoted uniformity and predictability in patent litigation.  To the contrary, it causes uncertainty and discourages settlement of patent cases because there is a substantial probability that the trial court's construction will be rejected on appeal."  Amicus Brief of the Federal Circuit Bar Association at 8; and 
  

• "Instead of providing early closure on claim construction issues that can effect every other aspect of litigation, the lack of deference and high reversal rate encourage dissatisfied litigants to contest every issue in the case and then pursue an appeal."  Amicus Brief of the AIPLA at 23.

Notwithstanding these and other similar arguments, the Federal Circuit declined to address this issue in Phillips.  In his dissent, Judge Mayer chastised the majority for not doing so.  Rife with charged terms, the dissent states, "[w]hat we have wrought … is the substitution of a black box, as it so pejoratively has been said of the jury, with the black hole of this court."  The dissent referred to district court proceedings in the wake of Cybor as a "charade," adding that "this court treats the district court as an intake clerk, whose only role is to collect, shuffle and collate evidence …."  The dissent concluded with its analogy of patent infringement litigation to the sinking Titanic, concluding "the orchestra is playing as if nothing is amiss, but the ship is still heading for Davey Jones' locker.”

It is evident from the high reversal rate that achieving better uniformity in the patent laws remains an elusive goal for the Federal Circuit.  As the Phillips court was not prepared to address the issue of deference to the district courts "at this time", the district courts and litigants in patent infringement cases will have to continue to wait to see whether and how the Federal Circuit will address its high reversal rate and achieve uniformity in the future.

Published in a Daily Journal Corporation IP supplement.